Foreclosures and the computer tax

So, foreclosures are up because people can't make their mortgage payments.

Even if they didn't cause the problem, O'Malley's tax increases are
certainly making it worse.

O'Malley's sales tax increase is gobbling up money that may otherwise
have been used for mortgage payments.

And the Democrat's computer tax increase is about to hit with a triple whammy.

It will drive computer businesses out of that state. That will have
three negative effects.

One, it will reduce tax revenues overall.

As it reduce the number of jobs in the state . . .

Two, some people will lose their jobs, and their ability to make their
mortgage payments, thus driving the foreclosure rate up, and

Three, other people will be forced to sell their homes to move out of
state, at a time when houses aren't selling, thus further depressing
the price of houses and further reducing the property tax base.

The Democrats in Annapolis who are whining about the foreclosure rate
ought to look in the mirror to see who is making it worse for
Marylanders.

On Sun, Mar 16, 2008 at 6:56 AM, cfcamacho@comcast.net wrote:

Wall Street Journal: High Tech Tax in MD
March 15, 2008

http://online.wsj.com/img/b.gif

AND

On Sun, Mar 16, 2008 at 7:24 AM, cfcamacho@comcast.net wrote:

I have also added the following article from March 2006 in the Wash Post at the end.

Judge Suspends Montgomery Law On Penalties for Predatory Lending

Secretary Tom Perez at the time was a Montgomery County Council member and saw what was happening but you see the results of his legislation.

When my husband and I decided to move back to Prince George's County 12 years ago we found a home we loved and our Realtor put us in touch with a lender she normally used. We have always had an excellent credit history. This "lender" tried to give us a mortgage that hada much higher interest rate than the norm for folks with our credit. I guess she thought -"just two Hispanics". Well this Hispanic was a HUD certified housing counselor in a previous life :)).

I feel sorry for all the folks like Ms. Mitchell that did not know better and trusted the people she was dealing with, at the same time I have no pity for those that wanted to live beyond their means. Like our neighbor who made $9.75 an hr and bought a $500,000 home.

Suffering in Silence Over Foreclosure

In Upscale Md. Subdivision, Few Know the Troubles Neighbors Face

By Ovetta Wiggins

Washington Post Staff Writer

Sunday, March 16, 2008; A01

The lawns on Bar Geese Court are neatly manicured, in keeping with the homeowners association rules that the grass be tidy. The spacious homes with brick fronts, glistening Palladian windows and bumped-out family rooms sit stately on quiet cul-de-sacs and winding streets.

The Perrywood subdivision in Upper Marlboro has long been synonymous with the pride and promise of Prince George's County, the nation's wealthiest majority African-American jurisdiction.

Lately, though, this suburban idyll has been afflicted by the same economic forces that have plagued less prosperous communities.

Two of eight homeowners on Bar Geese are in foreclosure, according to RealtyTrac, which documents housing trends. In the past two years, 49 owners in the 1,100-home subdivision have either received notices threatening foreclosure, gone through auction proceedings or had their homes repossessed. Fourteen of those actions occurred in the past four months.

With foreclosures nationwide at a record high in the fourth quarter of 2007, almost 3 percent of homes in predominantly black Perrywood were in foreclosure last year, a figure that is almost double the Prince George's rate and more than three times the state's rate.

Perrywood's story is remarkable, not just for its cluster of defaults or the relative affluence of its residents. It also reflects a troubling national trend: African American homeowners and other minorities are more likely than non-Hispanic white borrowers to be saddled with the subprime loans and adjustable-rate mortgages that put them at greater risk of losing their homes. Black women were five times more likely than white men to receive subprime loans in 2006, a report by the Urban League says.

But the Perrywood story is one of resilience. Owners in default are not walking away or neglecting their properties, as is increasingly happening in California and Florida. Few Perrywood residents even know their neighbors are in financial distress.

"Don't let the green grass and pretty houses fool you," Kimberly Mitchell, who is facing foreclosure, told her young son as they drove through their neighborhood. "America puts a pretty face on it."

Falling Behind Each Month

When Mitchell, 38, first saw the townhouse on Whistling Duck Drive, she knew she had found her next home.

The three-story house with a brick front and entry set off by white columns offered plenty of space and was close to a good school. Mitchell, a single mother, bought the house eight years ago for $200,000 and took out a fixed-rate mortgage with a 7 percent interest rate. It was her first house, and, as a young woman earning $90,000 a year at a job in sales, she was proud of it.

"It took us over a year, every time we turned the doorknob, to stop crying," she said.

Longing for a chance to start her own business and spend more time with her son, Mitchell left her corporate job in 2002 and started a day-care center in her home. The day-care business and finances were fine, she said, until she decided to refinance her home in 2005 and tap its equity to consolidate bills. Her loan officer steered her to an 8 percent adjustable-rate mortgage, assuring her that she could refinance later and return to a fixed-rate interest loan.

Mitchell said her monthly payment jumped by $300 a month, and she quickly fell behind. She later learned that her property taxes of more than $3,000 a year were no longer a part of her mortgage payments. In October, her rate will increase to more than 10 percent.

Mitchell recently discussed a letter she received from her lender that threatened foreclosure and the anger she feels about what she considers an "unscrupulous loan." She acknowledged that she was too trusting and did not read all the paperwork, which she regrets.

Now she is stuck.

"When you call a refinance company, they base it on your credit score," Mitchell said, adding that her credit is not good. "It's a no-win situation."

She said she doubted her neighbors were aware of her situation, which she does not discuss.

Fighting back tears, Mitchell described the stress she has endured. She said she and her son have resorted to eating noodles and peanut butter and jelly sandwiches several times a week to save money.

"I don't know the last time I got eight hours of straight sleep," she said. "I just feel robbed."

Many Subprime Loans

In Perrywood, where recent list prices ranged from $329,900 for a townhouse to $679,000 for a detached house, dozens of Mitchell's neighbors are facing similar financial woes. Several residents listed on RealtyTrac's foreclosure records would not answer their doors to a reporter or return phone calls. Most who did talk did not want their names published.

"People are suffering in silence," said state Sen. Ulysses Currie (D-Prince George's), who represents Perrywood. "They get behind in the payments, go into denial, feel like it's not happening."

Perrywood's predicament is not unique. Well-to-do developments in Las Vegas, Phoenix and Riverside County, Calif., are also feeling the brunt of the mortgage crisis, said Richard Green, a finance professor at George Washington University. Often these homeowners simply took on more debt than they could handle, he said, counting on rising home values to bail them out. When the market foundered, many were left owing more than their houses were worth.

In Perrywood and more broadly in Prince George's, Maryland officials said they think discriminatory lending practices also played a part in the rise of foreclosures.

"It's an issue that has to be looked at very carefully," said Maryland Labor Secretary Thomas E. Perez. "People ask why is this happening disproportionately in Prince George's County. It's not difficult to understand when you know it's a majority African American county."

In Baltimore, city officials filed suit in January against Wells Fargo Bank, claiming that the lender sold higher-interest subprime loans to black homeowners more frequently than to white borrowers. Steven A. Silverman, consumer protection chief for the Maryland attorney general's office, said the state is reviewing Baltimore's claims.

Perez, who was chairman of a state task force on foreclosures, said he thinks some borrowers in Prince George's were steered toward adjustable-rate loans when they qualified for better deals.

Prince George's residents, on average, have credit scores that are higher than the state average, according to CreditXpert, a credit-management software company in Towson.

About 58 percent of county residents who refinanced homes in 2006 received subprime loans, compared with 34 percent of homeowners statewide, according to statistics provided by Maryland Legal Aid.

The county's foreclosure rate reached 1.5 percent last year, twice as high as any other jurisdiction in Maryland, RealtyTrac data showed. In the first nine months of last year, the county recorded 3,310 foreclosures filings.

Moving Out and Up

This is not the scenario Bill Chesley envisioned for Perrywood when he bought the old Tuck Farm in 1980 with plans to transform the 540-acre expanse of land into an upscale subdivision.

In the early 1990s, bulldozers started moving ground, and soon, houses were popping up. The development near Route 202 quickly became a sought-after address, particularly among upper-middle class African Americans from elsewhere in the county and the District looking for larger homes and more convenient amenities.

At the time, the county was seeking to move its housing stock beyond the garden apartments of the 1960s and the low-cost housing of the 1970s and 1980s. The new wave of development brought about eye-popping neighborhoods such as Lake Arbor, Woodmore and Perrywood, all planned communities with big houses and big price tags.

For many who moved in, the upscale developments were proof that they had made it.

Carmen Strother moved to Perrywood four years ago from Fairmount Heights, where she said crime was so bad she would not let her children play outside. "The neighborhood is quiet," she said, noting that the Perrywood Community Association pays for security patrols. "Here, everybody has big yards."

Some have big mortgages, too. Del. Aisha N. Braveboy (D-Prince George's), who represents Perrywood, said she understands how homeowners can get into mortgage trouble. "These are people who have great incomes, but their houses are priced at a point where they can't afford them," she said.

One homeowner said she started receiving foreclosure notices shortly after her husband was killed. Now, she is trying to unload her five-bedroom house in a short sale, in which a lender agrees to take less than a house is worth to avoid the costs of foreclosure.

Another woman, an executive with the federal government who spoke on condition of anonymity, said her family worked hard to make life appear normal as they fell behind on their mortgage payments after her husband's company closed. The family has since rebounded with the help of a new job and a refinanced mortgage.

"Everybody is perpetrating, giving this impression that 'I'm living well and nothing's wrong.' Myself included," she said.

Shame of Foreclosure

Real estate agents who work in Perrywood said homeowners have kept up appearances because they are too proud to let their financial distress show. "People who go through these pre-foreclosures, they mask things," said Joseph A. Bryant, an agent with Re/Max One. "They keep everything inside the four walls. People will go through hell, and you'd never know it."

The homeowners association also plays a part with its demands that properties be held to a certain standard. Mac Claxton, president of the Perrywood Community Association, said the foreclosures have not adversely affected the neighborhood. He said the association has some outstanding dues, but the reason is unclear.

Real estate agents said sales in Perrywood have been no different than in other county neighborhoods, given the housing slump.

Kimberly Mitchell, who owes $260,000 on her mortgage, said she tried to refinance at a lower rate, but lenders said her credit was not good enough.

So she put her house on the market. List price: $350,000.

Staff researchers Rena Kirsch and Meg Smith contributed to this report.

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Judge Suspends Montgomery Law On Penalties for Predatory Lending

By Kirstin Downey and Cameron W. Barr

Washington Post Staff Writers

Wednesday, March 8, 2006; A01

Montgomery County's effort to curb discrimination in mortgage lending through harsh penalties against alleged predators ran into two major obstacles yesterday. A state judge issued a temporary injunction to halt the law's enforcement for four months, and the Bush administration said the measure usurps federal authority.

The double blow jeopardized what Montgomery's officials characterized as an effort to strengthen civil rights protections in an increasingly diverse county. But it also stopped the defection of mortgage lenders -- about two dozen of whom have announced that they would suspend making loans in Montgomery. Such departures would raise the possibility that the market would become less competitive and force up the price of loans.

The legislation, which was to go into effect today, would raise from $5,000 to $500,000 the maximum damages that a lender must pay if a borrower can show discrimination.

An industry association sued the county last month, and several mortgage lenders asked the Treasury Department's Office of Thrift Supervision, the federal agency that regulates more than 800 savings and loan institutions, to review the county's action. The agency's chief counsel, John E. Bowman, wrote in a legal opinion that savings and loan institutions, which provide home loans, do not have to comply with the local law. If legislation such as Montgomery's were allowed to proceed, he said, "then countless other local governments throughout the United States could do so as well, usurping Federal authority to establish uniform rules."

Also yesterday, Circuit Court Judge Michael D. Mason ruled that the plaintiffs had "raised questions that are serious, substantive and fair grounds for litigation" and ordered the county to refrain from enforcing the new law until he makes a final decision in the case after a hearing scheduled for early July.

The law's chief backer vowed to continue his fight. "I disagree with efforts to put local governments out of the business of protecting residents from discrimination," County Council member Tom Perez (D-Silver Spring) said. "I'm going to fight against that."

He seemed unfazed by the federal intervention. "It's an opinion -- it has no legal standing," he said.

Two council members who have long opposed the legislation, Michael Knapp (D-Upcounty) and Howard A. Denis (R-Potomac-Bethesda), said they would work to repeal it, citing concerns about the economic impact.

Consumer activist Ira Rheingold, executive director of the National Association of Consumer Advocates, said he was shocked by the federal preemption of the Montgomery law, adding that he had "never before seen" a federal agency preempt a discriminatory lending law. Discriminatory lending is also prohibited under federal law, but is seldom enforced by federal banking regulatory agencies, he said.

"If the OTS is not a captive agency, I don't know what is," Rheingold said. "It's being done simply to protect industry, not to protect consumers."

The tussle over the Montgomery law is part of a debate over how and whether local governments have the right to enforce laws against predatory lending practices, at a time when there is widespread acknowledgment that abusive lending practices have become more commonplace. More than 20 states have passed laws restricting predatory lending, creating what lenders say is a patchwork of conflicting laws and standards across the county.

Bush administration banking regulators have said that nationally chartered financial institutions do not need to comply with local predatory lending laws. The Office of the Comptroller of the Currency, which regulates banks, in 2003 said that federal law preempted predatory lending laws passed in New Jersey and Georgia.

The new law in Montgomery sought to protect minority borrowers at a time when new federal lending statistics have found that blacks and Hispanics are paying much more for loans than whites and Asians. Lenders say they must charge higher interest rates to people who are greater credit risks.

Perez, a Latino and a civil rights lawyer who served in the Clinton administration, is one of two minority politicians ever elected to the Montgomery County Council. He has said that Montgomery's leadership does not adequately reflect the county's increasing diversity, and he championed the lending legislation as a way to represent the interests of what he calls the "new Montgomery."

More than two dozen lenders, of about 600 doing business in Montgomery, had said they would cease or suspend lending in the county because the law is worded too vaguely and would expose them to financial risk. The new law amends legislation that allows damages against lenders who discriminate against minorities by giving them costlier loans than other borrowers receive or by overcharging them on fees.

The American Financial Services Association and a group of mortgage brokers and lenders challenged Montgomery in a lawsuit last month, saying that only the state of Maryland can regulate lending. County lawyers responded that state laws allow local jurisdictions to protect civil rights and argued that the Montgomery bill sought to regulate discrimination, not lending.

Montgomery lenders and borrowers expressed relief at the ruling.

"We are absolutely thrilled a judge has realized the potential damage this law could cause," said Thomas Shaner, executive director of the Maryland Association of Mortgage Brokers. "We're all against discrimination here, but let's find another solution."

View all comments that have been posted about this article.

By Kirstin Downey and Cameron W. Barr

Washington Post Staff Writers

Wednesday, March 8, 2006; A01

Montgomery County's effort to curb discrimination in mortgage lending through harsh penalties against alleged predators ran into two major obstacles yesterday. A state judge issued a temporary injunction to halt the law's enforcement for four months, and the Bush administration said the measure usurps federal authority.

The double blow jeopardized what Montgomery's officials characterized as an effort to strengthen civil rights protections in an increasingly diverse county. But it also stopped the defection of mortgage lenders -- about two dozen of whom have announced that they would suspend making loans in Montgomery. Such departures would raise the possibility that the market would become less competitive and force up the price of loans.

The legislation, which was to go into effect today, would raise from $5,000 to $500,000 the maximum damages that a lender must pay if a borrower can show discrimination.

An industry association sued the county last month, and several mortgage lenders asked the Treasury Department's Office of Thrift Supervision, the federal agency that regulates more than 800 savings and loan institutions, to review the county's action. The agency's chief counsel, John E. Bowman, wrote in a legal opinion that savings and loan institutions, which provide home loans, do not have to comply with the local law. If legislation such as Montgomery's were allowed to proceed, he said, "then countless other local governments throughout the United States could do so as well, usurping Federal authority to establish uniform rules."

Also yesterday, Circuit Court Judge Michael D. Mason ruled that the plaintiffs had "raised questions that are serious, substantive and fair grounds for litigation" and ordered the county to refrain from enforcing the new law until he makes a final decision in the case after a hearing scheduled for early July.

The law's chief backer vowed to continue his fight. "I disagree with efforts to put local governments out of the business of protecting residents from discrimination," County Council member Tom Perez (D-Silver Spring) said. "I'm going to fight against that."

He seemed unfazed by the federal intervention. "It's an opinion -- it has no legal standing," he said.

Two council members who have long opposed the legislation, Michael Knapp (D-Upcounty) and Howard A. Denis (R-Potomac-Bethesda), said they would work to repeal it, citing concerns about the economic impact.

Consumer activist Ira Rheingold, executive director of the National Association of Consumer Advocates, said he was shocked by the federal preemption of the Montgomery law, adding that he had "never before seen" a federal agency preempt a discriminatory lending law. Discriminatory lending is also prohibited under federal law, but is seldom enforced by federal banking regulatory agencies, he said.

"If the OTS is not a captive agency, I don't know what is," Rheingold said. "It's being done simply to protect industry, not to protect consumers."

The tussle over the Montgomery law is part of a debate over how and whether local governments have the right to enforce laws against predatory lending practices, at a time when there is widespread acknowledgment that abusive lending practices have become more commonplace. More than 20 states have passed laws restricting predatory lending, creating what lenders say is a patchwork of conflicting laws and standards across the county.

Bush administration banking regulators have said that nationally chartered financial institutions do not need to comply with local predatory lending laws. The Office of the Comptroller of the Currency, which regulates banks, in 2003 said that federal law preempted predatory lending laws passed in New Jersey and Georgia.

The new law in Montgomery sought to protect minority borrowers at a time when new federal lending statistics have found that blacks and Hispanics are paying much more for loans than whites and Asians. Lenders say they must charge higher interest rates to people who are greater credit risks.

Perez, a Latino and a civil rights lawyer who served in the Clinton administration, is one of two minority politicians ever elected to the Montgomery County Council. He has said that Montgomery's leadership does not adequately reflect the county's increasing diversity, and he championed the lending legislation as a way to represent the interests of what he calls the "new Montgomery."

More than two dozen lenders, of about 600 doing business in Montgomery, had said they would cease or suspend lending in the county because the law is worded too vaguely and would expose them to financial risk. The new law amends legislation that allows damages against lenders who discriminate against minorities by giving them costlier loans than other borrowers receive or by overcharging them on fees.

The American Financial Services Association and a group of mortgage brokers and lenders challenged Montgomery in a lawsuit last month, saying that only the state of Maryland can regulate lending. County lawyers responded that state laws allow local jurisdictions to protect civil rights and argued that the Montgomery bill sought to regulate discrimination, not lending.

Montgomery lenders and borrowers expressed relief at the ruling.

"We are absolutely thrilled a judge has realized the potential damage this law could cause," said Thomas Shaner, executive director of the Maryland Association of Mortgage Brokers. "We're all against discrimination here, but let's find another solution."